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SSRN Electronic Journal
Article . 2005 . Peer-reviewed
Data sources: Crossref
EconStor
Research . 2005
Data sources: EconStor
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Cyclical Implications of Minimum Capital Requirements

Authors: Heid, Frank;

Cyclical Implications of Minimum Capital Requirements

Abstract

Capital requirements play a key role in the supervision and regulation of banks. The Basel Committee on Banking Supervision is now changing the current framework by introducing risk-sensitive capital charges. There have been concerns that this will unduly increase volatility in the banks' capital. Furthermore, when the credit supply is rationed, capital requirements may exacerbate an economic downturn. We examine the problem of cyclicality in a macroeconomic model which explicitly takes regulatory constraints into account. We find that the capital buffer which banks hold on top of the required minimum plays a crucial role in mitigating the volatility in capital requirements. Therefore, despite the fact that capital charges may vary significantly over time, the effects on the macroeconomy will be moderate.

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Keywords

pro-cyclicality, Konjunktur, regulatory capital, ddc:330, Bankbilanz, economic capital, Eigenkapitalvorschriften, minimum capital requirements,regulatory capital,economic capital,capital buffer,pro-cyclicality,business cycle,bank lending channel, minimum capital requirements, business cycle, Makroökonomischer Einfluß, E44, capital buffer, G21, bank lending channel, Wirtschaftspolitische Wirkungsanalyse, Theorie, E32, jel: jel:E32, jel: jel:E44, jel: jel:G21

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
1
Average
Average
Average
bronze